Falling foul of first-time buyer rules . . . and the Revenue

Q&A: Dominic Coyle answers your personal finance questions

‘Do I qualify as a first-time buyer?’ Photograph: Getty Images/iStock

‘Do I qualify as a first-time buyer?’ Photograph: Getty Images/iStock

 

I’m 34 years old running my own business. When I was 20 my father and uncle purchased an investment property. I had received a claim at the time and put some money forward for the deposit with them.

The property was put in my name so we qualified for first-time buyers. I didn’t know much at the time about the property and I remember it was sold two or three years later with very little profit.

I’m hoping to finally get a mortgage for myself and my family this year through the council for a private purchase and I’m wondering if you could tell me if I would/could qualify as a first-time buyer?

Mr G.B., email

We rely on our elders for guidance when we are young – especially in areas like the law, investment and general rules and regulations: unfortunately, sometimes that trust is not warranted.

Essentially, your father and uncle look to have “gamed” the system 14 years ago when they pretended the property they were buying was actually yours in full, in order to qualify for the benefits of first-time buyers status. In fact, by your own account, you simply contributed in part to the deposit and, from what you say, had nothing to do with any mortgage payments.

While first-time buyer status is of limited financial benefit these days, it was a more tangible benefit back then. That brings the whole thing into the area of dishonesty and, more importantly, potential illegality.

That is the sort of thing that Revenue takes a keen interest in. And people do get prosecuted where the tax authorities gather sufficient evidence that the system has been defrauded.

You don’t say whether any financial benefit that arose came your way as the nominal first-time buyer, but it seems unlikely. Nor do you clarify whether you benefited from whatever small profit was made on the eventual sale of this property but I’m guessing you certainly didn’t receive the whole of it.

Declared

Quite apart from anything else, any mortgage your father and uncle would have taken out to fund the balance of the purchase would have had in your name to secure first-time buyer status. And that means there is a question as to whether they might have lied on mortgage document – with or without the complicity of the lender – to obtain financial benefit.

Finally, first-time buyer status never applied to investment properties. If this property was rented out at the time and that rent wasn’t declared, there are separate Revenue issues. If it had been declared, you – and they – would have lost any benefit of being a first-time buyer.

I suggest the less you, or your relatives, say on this issue, the better – even after all this time.

What is crystal clear, though, is that you have lost the right to claim first-time buyer status on the loan you are now trying to raise to buy a home for you and your family. The rule is very black and white: if you have ever owned a property, or even a share of a property, at any time in any country, not just Ireland, then you can no longer be considered a first-time buyer.

For a couple, this is the case where either of the purchasers has previously owned, or part-owned a property.

These days, it really only affects the amount of deposit you must put up for the property – a first-time buyer must save only 10 per cent of the purchase price under Central bank rules while previous property owners must save a deposit of at least 20 per cent.

I say “only” but clearly putting aside an extra 10 per cent of the value of a home at current prices is a considerable strain for young families.

However, it is definitely not worth you trying to game the system. As it is, even if Revenue did pursue the previous property purchase, they might well be persuaded that you had no idea what was going on – even though you would be legally liable for a fraudulently false declaration of first-time buyer status, which you would have had to sign.

Trying to claim first-time buyer status now when you know you have had an interest in a previous property – and were named as sole owner on the deeds – could land you in your own issues with the Revenue. It is easy for them to check these things.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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